The Latest on Crowdfunding for Startups and Businesses

In 2013 my business partner Carl Weis wrote an article about
crowdfunding and how this new fundraising
mechanism could be a major game changer for startups and small businesses. Fast
forward to today and crowdfunding has become a mainstay for startups, new technologies,
music creation, video and book projects, and a whole horde of individual and non-profit
fund-raising initiatives. Everything from personal cancer treatment to conquering
world hunger is now in play. Crowdfunding is becoming the go to method that startups
and unconventional business ventures use to raise money. They are bi-passing the
old means where you would go hat in hand to family, bank or angel/venture capital
firms, trying to get your business or project off the ground. In this episode, of
Working the Web to Win, we will explore the current state of crowdfunding and other
alternatives to conventional methods for raising money for startups and business.

When Carl Weis wrote the article called; “Crowdfunding, it's a Game Changer,” crowdfunding was relatively new. There were only
a few crowdfunding platforms like Kickstarter, Indiegogo and RocketHub. At that time, there
was a new entrepreneur festival created in Jacksonville called One Spark.
It was touted as the first and only idea contest
and festival in the world. Indeed, it had hundreds of participants and many thousands
of dollars in startup money for the winners of the competitions. My company went
looking to help entrepreneurs at the festival. We knew we could help market their
ideas both through internet marketing and also by helping them create a “Kick Starter”
campaign. We quickly learned that many of the early crowdfunding platforms were
not business friendly. In fact, they seemingly discriminated against many types
of business start-up projects. We also quickly learned, that to be successful your
timing had to be perfect, you had to have either a prebuild following (like a book
series or movie) or a lot of time and money to build that following.

Most Crowdfunding Ventures Fail for Several Reasons
Since the initial writing of our first crowdfunding article we
have also written, “Go Fund Yourself!” and “How Nonprofit organizations Can Get The Most
Out of Social Media” to help entrepreneurs to reach their uphill startup
goals. This steep uphill battle has spawned an entirely
new marketing industry devoted to helping companies succeed with their crowdfunding
ventures.

To be successful, you have to do a lot of due diligence first. On top of that, you have to have an angle that is catchy and clever. Your pitch has to be visionary in scope and flawless.
Lastly, you had to provide a really strong
value-add proposition, if you wanted people
to buy on your crowdfunding campaign. We also learned that only a small number of
the early adopters actually reached their
goals. Todays, Kick starter stats show that about 35% of campaigns
reach their goals. This also seems
to be true for crowdfunding in general. An article on Entrepreneur.com entitled
“Less Than a Third of Crowdfunding Campaigns Reach Their Goals,” show that “Between 69 and 89
percent of projects -- depending on the platform -- fail to reach their targets”. This means that most participant campaigns fail!

Of the early crowdfunding platforms, we found Indiegogo the most business-friendly
as it would allow you to create a campaign where you could keep what you had raised,
even if you did not reach your goal. They offer more flexibility on deadlines and
extending your campaign. They also offer more marketing support as this is a critical
aspect of success. Today, companies like Matrix Labs offers marketing help
for startups and projects launching on Kick Starter and companies like ArborCrowd
specialize in real estate startup ventures. Beyond these, I have found a slew of
companies that specialize in crowdfunding marketing support.

You can click on any of the names to visit
their websites. When I saw their pricing, the first thing that went through my mind
was, “buyers beware!” Basically, it’s wild
west pricing. Most of the entrepreneurs we had worked with from One Spark could
not have afforded most of these marketing companies. The article in CrowdfundingUSA.org
rates these companies, and they rated Beyond Buzz as their "#1 choice because their Partnerships are based on the funds they actually raise you – not from total funds raised."

Equity crowdfunding sites allow early adopters to take an equity
stake in your company/project as part of the crowdfunding
equation. This allows an entrepreneur to raise
money in much smaller chunks from many investors instead of having to find one or
two angel or venture capital companies to get their startup off the ground. Here
are some more equity crowdfunding platforms provided in the above mention article
by FitSmallBusiness.com: AngelList,
CircleUp, Crowdfunder, SeedInvest, EquityNet, andRealtyMogul.

Don’t let the high failure rate of Reward Crowdfunding platforms
scare you away. There are other alternatives. With debt crowdfunding, you are getting a loan not just giving
rewards to supporters. Backers on the crowdfunding site expect you to pay that loan
back within a specific time frame. The main benefit of debt crowdfunding is that
it’s typically much faster than obtaining a loan through a bank (if you could get
one), and it’s also easier to qualify. The above article from FitSmallBusiness.com listed these
debt crowdfunding platforms: Lending Club, Funding Circle, Kickfurther, Bolstr, Kiva, Prosper, RealtyShares and Patch of Land.

Crowdfunding Alternatives

If none of the above crowdfunding platforms seem a good fit,
there are Microloans and the FranFund's ROBS Program. Microloan programs are designed for entrepreneurs
with verifiable credit but don’t have equity
to cover the small loans they needs. FranFund’s, aka ROBS programs, allow an entrepreneur to access their retirement
savings tax-deferred and penalty-free to invest in your new business.

While researching this subject I came across many useful articles
that I feel

would be of great value to any entrepreneur who is contemplating engaging
in a crowdfunding venture. This list, along with the rest of the links in this article,
can act as a great primer to help you get your project off on the right foot. Here’s
my article list.

Crowdfunding has become a mainstay for many entrepreneurs looking
to launch their businesses, inventions, or creative projects. The recession of 2008
helped this new fundraising venue grow, as banks were not lending, and many Angel
and venture capital concerns became very conservative during this period. These
platforms have launched hundreds of entrepreneurs to startup stardom and
wealth. They have also drained many of their
energy, ideas and what little cash they had as well. With a full 2/3 of all crowdfunding
campaigns not reaching their goals, anyone one contemplating this avenue needs to do their due diligence before jumping in
head first.

The many marketing companies that specialize in the crowdfunding
foray are not cheap. If you are looking for one of these companies to pull a rabbit
out of the hat, think again. Remember, 2/3 of all campaigns fail. Also, many don’t
qualify as some of the marketing companies are cherry picking because they want
to maximize their return with a winner. I don’t want to sound negative as I have
seen many successes. In my opinion, any business venture without risk is usually
not worth getting into anyway.

Vet Your Idea for Success

My recommendation is to make sure your project is worthy first.
Vet your idea by first putting together a
project usingIndiegogo to test it and to work the bugs out of what
you're trying to accomplish. If you have done your homework by clarifying your idea,
goals, customer benefits, created a unique selling proposition and know your targeted
customer profile, you have a chance. If you’ve also created a compelling offer and
you have come up with a catchy angle and rolled it all into a clever and compelling
pitch, you have a real chance at success. By going through this exercise, you will
learn a lot. The worst that will happen is you will learn your idea was not worthy
and you will lose your investment in time and a little bit of money. But you know
what they say about business and success right? Nothing ventured – nothing gained.

That’s My Opinion; I look forward to reading yours.

This article provides the entrepreneurial reader with an overview
of the current state of crowdfunding today. It provides current information about
several types of crowdfunding platforms including, Rewards, Equity, and Debt Crowdfunding along with information about
an alternative to Crowdfunding as well. This
article includes an extensive list of linked articles about crowdfunding to help
the entrepreneur gather a broad understanding of the subject to help them plan for
success.

Please feel free to contact us with questions and or requests
for articles you’re

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interested in by emailing me, at hectorc@workingthewebtowin.com.
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Hector Cisneros is COO and Director of Social
Media Marketing at Working the Web to Win, an award-winning
Internet marketing company based in Jacksonville, Florida. He is
also co-host of the weekly Internet radio show, "Working the Web to Win"
on BlogTalkRadio.com, which airs every Tuesday at 4 p.m. Eastern. Hector is a
syndicated writer and published author of “60
Seconds to Success.

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By Hector Cisneros I have been actively networking in a number of organizations since the early 1980’s. My experience, tells me that most...

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Our Privacy Policy - Your privacy is important to us. We are the sole owners of the information collected on this site. We only have access to information you voluntarily give us via email or other direct contacts from you. We will not sell or rent this information to anyone. We will use your information to respond to you, regarding the reason you contacted us. We will not share your information with any third party outside of our organization, other than as necessary to fulfill your request. Unless you ask us not to, we may contact you via email in the future to tell you about our FREE eBooks, new services, specials, or changes to this privacy policy. If you to unsubscribe from our newsletter or remove access to our FREE eBooks, you can unsubscribe when you receive our newsletters, email me at, hectorc@workingthewebtowin.com with the heading Unscribe from Newsletter and Free eBooks, listing your the email address you subscribed with. you can also text me at 904-712-9355 with the same information or send us a letter to unsubscribe at Working the Web to Win, 3740 Beach Blvd. #300 Jacksonville Fl. 32207. Again please make sure you tell us the email address you subscribed with.